News Release

Printer Friendly Version View printer-friendly version
<< Back
Express, Inc. Reports a 35% Increase in First Quarter Operating Income Exceeding Q1 Guidance; Raises Full Year 2011 Guidance

-- Comparable sales increase 8%
-- Gross margin expands by 130 bps to 38.2% of net sales
-- Operating margin expands by 290 bps to 14.9% of net sales
-- Raises full year 2011 guidance

COLUMBUS, Ohio, May 24, 2011 /PRNewswire via COMTEX/ --

Express, Inc. (NYSE: EXPR), a specialty retail apparel chain operating over 590 stores, today announced its first quarter financial results for the thirteen week period ended April 30, 2011, which compares to the thirteen week period ended May 1, 2010.

Michael Weiss, Express, Inc.'s President and Chief Executive Officer commented: "We had a strong start to the year reporting better-than-expected comparable sales and earnings, continuing our positive momentum from 2010. The ongoing execution of our go-to-market strategy and progress against our four growth pillars provided us with a sustained platform for growth and led to a 10% increase in net sales, an 8% increase in comparable sales, a 130 basis point expansion in gross margin, and a 35% increase in operating income in the first quarter as compared to a year ago."

"We are excited about our positioning as we begin the second quarter," Mr. Weiss continued. "Customers are responding favorably to our assortments across our end uses; our store expansion remains on track, including the scheduled opening of our first locations in Canada in September of 2011; and we have additional initiatives in place to elevate our brand positioning with consumers as we test our innovative new store format, enhance our loyalty program, and capitalize on social media marketing opportunities. We are delighted to raise our full year guidance and expect 2011 to represent a year of significant accomplishments toward our long-term goals."

First Quarter Operating Results:

  • Net sales increased $40.9 million, or 10%, to $467.4 million from $426.5 million in the first quarter of 2010;
  • Comparable sales increased 8% in the first quarter following a 14% increase in comparable sales in the first quarter of 2010;
  • Gross margin increased approximately 130 bps to 38.2% compared to 36.9% in the first quarter of 2010;
  • Selling, general, and administrative (SG&A) expenses totaled $109.5 million, or 23.4% of net sales, and included $0.6 million of costs related to the secondary offering completed on April 6, 2011. This compares to SG&A expenses of $102.9 million, or 24.1% of net sales, in the first quarter of 2010, which included $1.8 million in costs related to the Senior Notes offering completed on March 5, 2010 along with a portion of the costs related to the initial public offering completed on May 18, 2010;
  • Operating income increased $18.1 million, or 35%, to $69.4 million, or 14.9% of net sales, compared to $51.3 million, or 12.0% of net sales, in the first quarter of 2010;
  • Interest expense totaled $11.0 million and included a $3.5 million loss on extinguishment of debt related to the repurchase of $25.0 million of Senior Notes. This compares to interest expense of $20.8 million in the first quarter of 2010, which included a $7.2 million loss on extinguishment of debt related to the Term C Loan prepayment;
  • Income tax expense was $23.4 million, at an effective tax rate of approximately 40.1%, compared to tax expense of $0.4 million, at an effective tax rate of approximately 1.2%, in the first quarter of 2010. The increase in the effective tax rate is a result of the Company's conversion to a corporation in connection with its initial public offering in the second quarter of 2010;
  • Net income was $35.0 million, or $0.39 per diluted share on 88.8 million weighted average shares outstanding, and includes the following non-core operating costs after tax: (i) $0.3 million, or $0.01 per diluted share, related to the secondary offering completed on April 6, 2011; and (ii) $2.1 million, or $0.02 per diluted share, related to the repurchase of $25.0 million of Senior Notes. This compares to net income of $30.6 million, or $0.39 per diluted share on 78.1 million weighted average shares outstanding, in the first quarter of 2010, which included the following non-core operating costs after tax: (i) $1.8 million, or $0.02 per diluted share, related to the Senior Notes offering completed on March 5, 2010 and the initial public offering completed on May 18, 2010; and (ii) $7.1 million, or $0.09 per diluted share, associated with the Term C Loan prepayment; and
  • Net income, adjusted for non-core operating costs related to the secondary offering completed on April 6, 2011 and the repurchase of $25.0 million of Senior Notes, was $37.5 million, or $0.42 per diluted share (see Schedule 4 for discussion of non-GAAP measures), exceeding the Company's guidance of $0.38 to $0.41 per diluted share. This compares to net income, adjusted for non-core operating costs related to the Senior Notes and initial public offerings and the Term C Loan prepayment, of $39.4 million, or $0.50 per diluted share, in the first quarter of 2010 (see Schedule 4 for discussion of non-GAAP measures).

First Quarter Balance Sheet Highlights:

  • Cash and cash equivalents totaled $180.8 million compared to $83.3 million at the end of the first quarter of 2010;
  • Inventories were $172.8 million compared to $155.6 million at the end of the first quarter of 2010. Inventory per square foot, excluding e-commerce merchandise, increased approximately 7% compared to the first quarter of 2010 partly driven by the Company's "never out" strategy and strategic positioning of fabric; and
  • Debt declined by $173.1 million to $342.5 million at the end of the first quarter of 2011 compared to $515.6 million at the end of the first quarter of 2010. The decrease was primarily due to the Term B Loan prepayment in the second quarter of 2010 and the repurchase of $25.0 million of Senior Notes in the first quarter of 2011.

Store Expansion:

During the first quarter of 2011, the Company opened 4 new stores and closed 4 stores in the United States, ending the quarter with 591 stores and approximately 5.1 million gross square feet in operation.

2011 Guidance:

Tax Rate:

The Company estimates that its effective tax rate for the second quarter and full year 2011 will be approximately 40.3%. This compares to an effective tax rate of approximately 10.1% for full year 2010. The expected increase in the effective tax rate for full year 2011 compared to full year 2010 reflects the Company's conversion to a corporation in connection with its initial public offering in the second quarter of 2010.

Second Quarter:

The Company currently expects second quarter 2011 comparable sales to increase mid-single digits compared to an increase of 8% in the second quarter of 2010. Net income is expected in the range of $11 million to $13 million, or $0.12 to $0.15 per diluted share on 88.8 million shares outstanding. This compares to adjusted net income of $7.1 million, or $0.08 per diluted share on 88.7 million shares outstanding, in the second quarter of 2010 (see Schedule 4 for discussion of non-GAAP measures). This guidance implies operating income growth between 32% and 50% over adjusted operating income in the second quarter of 2010. The Company plans to open 9 new stores and close 2 existing locations in the United States, ending the second quarter with 599 locations and approximately 5.2 million gross square feet in operation.

Full Year:

The Company is increasing its full year 2011 guidance. The Company currently expects full year comparable sales to increase mid single digits compared to an increase of 10% for full year 2010. Adjusted earnings are expected in the range of $1.52 to $1.61 per diluted share on 88.9 million shares outstanding (see Schedule 4 for discussion of non-GAAP measures), which is increased from its previous guidance of adjusted earnings in the range of $1.48 to $1.60 per diluted share. This compares to adjusted earnings of $1.42 per diluted share on 86.1 million shares outstanding in 2010 (see Schedule 4 for discussion of non-GAAP measures). This guidance implies adjusted operating income growth between 18% and 24% over adjusted operating income for full year 2010 (see Schedule 4 for discussion of non-GAAP measures). The Company plans to open 25 to 27 new stores in the United States and Canada and close 9 existing locations in the United States, ending the year with 607 to 609 locations and approximately 5.3 million gross square feet in operation.

Conference Call Information:

A conference call to discuss first quarter results is scheduled for today, May 24, 2011, at 4:30 p.m. Eastern Daylight Time. Investors and analysts interested in participating in the call are invited to dial (877) 407-0784 approximately ten minutes prior to the start of the call. The conference call will also be webcast live at www.express.com/investor and remain available for 90 days. A telephone replay of the conference call will be available until 11:59 p.m. (EDT) on May 31, 2011 and can be accessed by dialing (877) 870-5176 and conference ID number 372541.

About Express, Inc.:

Express is a specialty apparel and accessories retailer of women's and men's merchandise, targeting the 20 to 30 year old customer. The Company has over 30 years of experience offering a distinct combination of fashion and quality for multiple lifestyle occasions at an attractive value addressing fashion needs across work, casual, jeanswear, and going-out occasions. The Company currently operates over 590 retail stores, located primarily in high-traffic shopping malls, lifestyle centers, and street locations across the United States and in Puerto Rico, and also distributes its products through the Company's e-commerce website, express.com.

Forward-Looking Statements:

Certain statements are "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any statement that does not directly relate to any historical or current fact and may herein include, but are not limited to, statements regarding expected net income, comparable sales, earnings per diluted share, operating income growth, effective tax rates, and store expansion and closures. Forward-looking statements are based on our current expectations and assumptions, which may not prove to be accurate. These statements are not guarantees and are subject to risks, uncertainties and changes in circumstances that are difficult to predict. Many factors could cause actual results to differ materially and adversely from these forward-looking statements. Among these factors are (1) changes in consumer spending and general economic conditions; (2) our ability to identify and respond to new and changing fashion trends, customer preferences and other related factors; (3) fluctuations in our sales and results of operations on a seasonal basis and due to store events, promotions and a variety of other factors; (4) increased competition from other retailers; (5) the success of the malls and shopping centers in which our stores are located; (6) our dependence upon independent third parties to manufacture all of our merchandise; (7) our growth strategy, including our international expansion plan; (8) our dependence on a strong brand image; (9) our dependence upon key executive management; (10) our reliance on Limited Brands to provide us with certain key services for our business; (11) our substantial indebtedness and lease obligations; and (12) increased costs as a result of being a public company. Additional information concerning these and other factors can be found in Express, Inc.'s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended January 29, 2011. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

Schedule 1

Express, Inc.

Consolidated Balance Sheets

(In thousands)

(Unaudited)


April 30, 2011


January 29, 2011


May 1, 2010

ASSETS






CURRENT ASSETS:






Cash and cash equivalents

$

180,792



$

187,762



$

83,270


Receivables, net

5,519



9,908



3,706


Inventories

172,794



185,209



155,575


Prepaid minimum rent

22,416



22,284



21,152


Other

21,373



22,130



18,486


Total current assets

402,894



427,293



282,189








PROPERTY AND EQUIPMENT

459,516



448,109



404,802


Less: accumulated depreciation

(251,748)



(236,790)



(194,874)


Property and equipment, net

207,768



211,319



209,928








TRADENAME/DOMAIN NAME

197,474



197,414



197,414


DEFERRED TAX ASSETS

5,513



5,513



--


OTHER ASSETS

18,697



21,210



28,586








Total assets

$

832,346



$

862,749



$

718,117








LIABILITIES AND STOCKHOLDERS' EQUITY






CURRENT LIABILITIES:






Accounts payable

$

74,208



$

85,843



$

49,558


Deferred revenue

19,280



25,067



18,008


Accrued bonus

5,332



14,268



6,099


Accrued expenses

88,232



91,792



69,507


Distributions payable

--



--



31,000


Accounts payable and accrued expenses - related parties

68,720



79,865



69,622


Total current liabilities

255,772



296,835



243,794








LONG-TERM DEBT

341,241



366,157



514,372


OTHER LONG-TERM LIABILITIES

68,012



69,595



41,741


Total liabilities

665,025



732,587



799,907








Total stockholders' equity

167,321



130,162



(81,790)








Total liabilities and stockholders' equity

$

832,346



$

862,749



$

718,117



Schedule 2

Express, Inc.

Consolidated Statements of Income

(In thousands, except per share amounts)

(Unaudited)


Thirteen Weeks Ended


April 30,
2011


May 1,
2010

NET SALES

$

467,377



$

426,462


COST OF GOODS SOLD, BUYING, AND OCCUPANCY COSTS

289,063



269,256






Gross profit

178,314



157,206






OPERATING EXPENSES:




Selling, general, and administrative expenses (A)

109,493



102,910


Other operating (income) expense, net

(602)



3,014


Total operating expenses

108,891



105,924






OPERATING INCOME

69,423



51,282






INTEREST EXPENSE (B)

11,005



20,780


INTEREST INCOME

(3)



(10)


OTHER INCOME, NET

--



(432)






INCOME BEFORE INCOME TAXES

58,421



30,944






INCOME TAX EXPENSE

23,408



383






NET INCOME

$

35,013



$

30,561






EARNINGS PER SHARE:




Basic

$

0.40



$

0.40


Diluted

$

0.39



$

0.39






WEIGHTED AVERAGE SHARES OUTSTANDING:




Basic

88,493



76,470


Diluted

88,751



78,142



(A) Includes $572 expense related to the secondary offering for the thirteen weeks ended April 30, 2011 and $1,817 expense related to the Senior Notes offering and the initial public offering for the thirteen weeks ended May 1, 2010.

(B) Includes $3,464 and $7,157 loss on extinguishment of debt for the thirteen weeks ended April 30, 2011 and thirteen weeks ended May 1, 2010, respectively.

Schedule 3

Express, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


Thirteen Weeks Ended


April 30,
2011


May 1,
2010

CASH FLOWS FROM OPERATING ACTIVITIES:




Net income

$

35,013



$

30,561


Adjustments to reconcile net income to net cash provided by operating activities:




Depreciation and amortization

17,385



17,009


Loss on disposal of property and equipment

33



1,145


Change in fair value of interest rate swap

--



(964)


Share-based compensation

2,146



1,563


Non-cash loss on extinguishment of debt

1,276



4,157


Changes in operating assets and liabilities:




Receivables, net

4,389



2,062


Inventories

12,415



16,129


Accounts payable, deferred revenue, and accrued expenses

(29,210)



(33,008)


Accounts payable and accrued expenses - related parties

(11,145)



(20,209)


Other assets and liabilities

(1,636)



(13,725)


Net cash provided by operating activities

30,666



4,720






CASH FLOWS FROM INVESTING ACTIVITIES:




Capital expenditures

(12,264)



(13,226)


Purchase of intangible assets

(60)



--


Net cash used in investing activities

(12,324)



(13,226)






CASH FLOWS FROM FINANCING ACTIVITIES:




Borrowings under Senior Notes

--



246,498


Repayments of long-term debt arrangements

(25,312)



(150,312)


Costs incurred in connection with debt arrangements and Senior Notes

--



(11,986)


Costs incurred in connection with equity offering

--



(2,461)


Repayment of notes receivable

--



5,633


Distributions

--



(230,000)


Net cash used in financing activities

(25,312)



(142,628)






NET DECREASE IN CASH AND CASH EQUIVALENTS

(6,970)



(151,134)






CASH AND CASH EQUIVALENTS, Beginning of period

187,762



234,404






CASH AND CASH EQUIVALENTS, End of period

$

180,792



$

83,270



Schedule 4

Supplemental Information - Consolidated Statements of Income

Reconciliation of GAAP to Non-GAAP Financial Measures


We supplement the reporting of our financial information determined under U.S. generally accepted accounting principles (GAAP) with certain non-GAAP financial measures: adjusted operating income, adjusted net income, and adjusted earnings per diluted share. We believe that these non-GAAP measures provide meaningful information to assist stockholders in understanding our financial results and assessing our prospects for future performance. Management believes adjusted operating income, adjusted net income, and adjusted earnings per diluted share are important indicators of our operations because they exclude items that may not be indicative of, or are unrelated to, our core operating results, and provide a better baseline for analyzing trends in our underlying business. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. These adjusted financial measures should not be considered in isolation or as a substitute for operating income, net income, and earnings per diluted share. These non-GAAP financial measures reflect an additional way of viewing an aspect of our operations that, when viewed with our GAAP results and the reconciliations to the corresponding GAAP financial measures below, provide a more complete understanding of our business. We strongly encourage investors and stockholders to review our financial statements and publicly-filed reports in their entirety and not rely on any single financial measure.


Schedule 4 (Continued)

Adjusted Operating Income, Adjusted Net Income, and Adjusted Earnings Per Diluted Share
(In thousands, except per share amounts)
(Unaudited)

The tables below reconcile the non-GAAP financial measures, actual and projected adjusted operating income, net income, and earnings per diluted share, with the most directly comparable GAAP financial measures, actual and projected operating income, net income, and earnings per diluted share.


Thirteen Weeks Ended April 30, 2011


Operating

Income


Net Income


Earnings per

Diluted Share


Weighted Average

Diluted Shares

Outstanding

Reported GAAP Measure

$

69,423



$

35,013



$

0.39



88,751


Transaction Costs (A)

572



348


*

0.01




Interest expense (B)

--



2,108


*

0.02




Adjusted Non-GAAP Measure

$

69,995



$

37,469



$

0.42





(A) Includes transaction costs related to the 2011 secondary offering

(B) Includes premium paid and accelerated amortization of debt issuance costs and debt discount related to the repurchase of $25 million of Senior Notes


* Items were tax affected at our statutory rate of 39.1% for the thirteen weeks ended April 30, 2011



Fifty-two Weeks Ended January 28, 2012


Projected

Operating

Income


Projected

Net Income


Projected

Earnings per

Diluted Share


Projected Weighted

Average Diluted

Shares

Outstanding

Reported GAAP Measure

$

260,928



$

136,544



$

1.53



88,873


Transaction Costs (A)

572



348


*

0.01




Interest expense (B)

--



2,108


*

0.02




Adjusted Non-GAAP Measure (C)

$

261,500



$

139,000



$

1.56





(A) Includes transaction costs related to the 2011 secondary offering

(B) Includes premium paid and accelerated amortization of debt issuance costs and debt discount related to the repurchase of $25 million of Senior Notes

(C) Amounts reflect midpoint of guidance range


* Items were tax affected at our statutory rate of 39.1% for the fifty-two weeks ended January 28, 2012

Schedule 4 (Continued)

Adjusted Operating Income, Adjusted Net Income, and Adjusted Earnings Per Diluted Share

(In thousands, except per share amounts)

(Unaudited)


Thirteen Weeks Ended May 1, 2010


Operating

Income


Net Income


Earnings per

Diluted Share


Weighted Average

Diluted Shares

Outstanding

Reported GAAP Measure

$

51,282



$

30,561



$

0.39



78,142


Transaction costs (A)

1,817



1,795


*

0.02




Interest expense (B)

--



7,071


*

0.09




Adjusted Non-GAAP Measure

$

53,099



$

39,427



$

0.50





(A) Includes transaction costs primarily related to the Senior Notes offering and a portion related to the initial public offering

(B) Includes prepayment penalty and accelerated amortization of debt issuance costs and debt discount related to the Term C Loan prepayment


* Items were tax affected at our statutory rate of 1.2% for the thirteen weeks ended May 1, 2010







Thirteen Weeks Ended July 31, 2010


Operating

Income


Net Income


Earnings per

Diluted Share


Weighted Average

Diluted Shares

Outstanding

Reported GAAP Measure

$

5,050



$

22,114



$

0.25



88,694


Transaction costs (A)

914



549


*

0.01




Advisory/LLC fees (B)

13,333



8,013


*

0.09




Interest expense (C)

--



8,188


*

0.09




Non-cash tax benefit (D)

--



(31,807)



(0.36)




Adjusted Non-GAAP Measure

$

19,297



$

7,057



$

0.08





(A) Includes transaction costs related to the Senior Notes offering and initial public offering

(B) Includes fees paid to Golden Gate Capital and Limited Brands, Inc. for terminating advisory arrangements

(C) Includes prepayment penalty and accelerated amortization of debt issuance costs and debt discount related to the Term B Loan prepayment

(D) Represents one-time, non-cash tax benefit in connection with the conversion to a corporation


* Items were tax affected at our statutory rate of 39.9% for the thirteen weeks ended July 31, 2010



Fifty-two Weeks Ended January 29, 2011


Operating

Income


Net Income


Earnings per

Diluted Share


Weighted Average

Diluted Shares

Outstanding

Reported GAAP Measure

$

199,251



$

127,388



$

1.48



86,050


Transaction costs (A)

3,333



2,718


*

0.03




Advisory/LLC fees (B)

13,333



8,121


*

0.10




Interest expense (C)

--



15,370


*

0.18




Non-cash tax benefit (D)

--



(31,807)



(0.37)




Adjusted Non-GAAP Measure

$

215,917



$

121,790



$

1.42





(A) Includes transaction costs related to the Senior Notes offering, initial public offering, and 2010 secondary offering

(B) Includes fees paid to Golden Gate Capital and Limited Brands, Inc. for terminating advisory arrangements

(C) Includes prepayment penalty and accelerated amortization of debt financing costs and debt discount related to the Term B Loan and Term C Loan prepayments

(D) Represents one-time, non-cash tax benefit in connection with the conversion to a corporation


* Items were tax affected at our statutory rate of 1.2% for the thirteen weeks ended May 1, 2010 and at our statutory rate of 39.1% for the thirteen weeks ended July 31, 2010, October 31, 2010, and January 29, 2011

Company Contact:
Matthew C. Moellering
Chief Administrative Officer &
Chief Financial Officer
(614) 474-4400

Media Contact:
Amy Hughes
Corporate Communications & Events
(614) 302-4651

Investor Contacts:
ICR, Inc.
Allison Malkin / Melissa Mackay
(203) 682-8200 / (646) 277-1220

SOURCE Express, Inc.

Print Page Print Page | RSS Feeds RSS Feeds | E-mail Alerts Email Alerts | Financial Tear Sheet Financial Tear Sheet